Two years ago the Islamic State's blitz assault across a swath of land as big as the United Kingdom led to the establishment of the self-proclaimed Caliphate and fragmented both Syria and Iraq. The recent defeats inflicted on the Islamic radicals, however, have considerably shrunk the areas under IS control in both countries.

ISIS children conducting executions of 25 Syrian soldiers in ancient Palmyra, in July 2015

Indeed, under the pressure of the Syrian-Iranian-Russian-Hizbullah coalition on the one hand and the American-Western-Iraqi and moderate-Arab coalition on the other, the Islamic State suffered enormous losses in manpower (according to the French minister of defense, 20,000 IS fighters have been killed during the last year) and more significantly, the IS has lost an estimated 40 percent of its territory, conquered only a few months earlier. The most symbolic loss was Palmyra, retaken by Bashar Assad's loyal forces with the active assistance of Russian air power and the infantry support of the Iranian Revolutionary Guard Corps and Afghani paramilitary units.

Likewise, in Iraq, the regime scored a huge success in recapturing key cities that had fallen under the IS control such as Ramadi and Beiji. Currently, the Iraqi regime is trying to reconquer a key Sunni city, Fallujah, north of Baghdad, while continuing to prepare an assault on Mosul, Iraq's second-largest city. A Kurdish coalition, reportedly assisted by U.S. Special Forces, is approaching the outskirts of Raqqa in Syria, the unofficial capital of the IS Caliphate.

Based on the latest advances of loyalist troops and militias both in Syria and Iraq, some fundamental questions arise: What has changed today that did not exist two years ago? What were the factors that brought that change in fortune, and what are the future prospects for the Islamic State? Are we witnessing the "beginning of the end" of the Islamic State, or is it a prelude for a resurgence in a new geographic area such as the failed state of Libya or even in a torn state such as Afghanistan?

Bearing in mind the Obama administration's policy of "No boots on the ground," the two main anti-Islamic State coalitions (one American-led, the other Russian-led) succeeded to contain the advance of the Islamic State in Syria and Iraq due to the following factors:

Attrition: Since August 2014 when the U.S.-led coalition initiated its air campaign against the IS the coalition has succeeded in eliminating thousands of Islamic fighters, but more important, it has struck and shaken the command and control structure of the IS. Notorious field commanders (such as Jihadi John, "the butcher," of the western hostages) and leaders of the Islamic state (red-haired Izzat Ibrahim) have been killed in the air campaign. "Caliph" Abu Bakr el-Baghdadi might have also been seriously injured in the course of a drone attack.

The addition of the Russian task force was but another element in eroding the IS ability to withstand the growing firepower of its enemies. Due to the immense capabilities of U.S. and Russian intelligence, the self-proclaimed Caliph and the different commanding officers of his troops are constantly on the run knowing almost for certain that the moment they reappear they become the favorite targets of Coalition airpower. Bearing in mind that part of the IS commanding pyramid (according to some estimates up to 25 percent of the commanding officers) were former officers of Saddam Hussein's army, their disappearance has taken a severe toll on the control and command structure of the IS. Their replacements suffer from lack of field experience and military education. Finally, considering the different assessments given by the Coalition spokesmen, it is believed that at least 20,000 IS fighters have been killed in the last two years, a very heavy burden to carry.

Problems of manpower: The Islamic State's ideology, territorial successes, and Western opposition were ingredients in the melting pot that attracted thousands of volunteers who flocked from all over the globe to join the ranks of the IS and other radical organizations. However, two years after the birth of the Caliphate, countries from where IS volunteers were recruited have adopted new rules of conduct and restricted the flow of volunteers to the IS. Aware that most of the fighters would come back to their native countries and become members of dormant IS agent cells, Western countries as well as countries such as Morocco, Algeria, Tunisia, Saudi Arabia and Lebanon now closely monitor the Salafist organizations in their countries to prevent illegal acts and the departure of volunteers to the IS. Of late, Turkey has also hardened its lenient attitude towards allowing volunteers to cross its borders to Syria and Iraq.

Finally, the bestial and barbaric videos spread via social media brought about a different reaction. While some recruits were hypnotized by the cruelty of the IS, the majority opted not to identify with the goals of the IS and refrain from being recruited by the IS professional networks. As a result, the Islamic State has been recruiting children and youngsters to its ranks hoping to fill the void created by the death of thousands of its fighters and the impossibility of replacing them with substantial "fresh troops" coming from abroad.

Firepower inferiority: When the IS took control of Mosul, it captured hundreds of Iraqi vehicles, military equipment, tanks, APCs, self-propelled artillery, ground-to-ground missiles, and ammunition. The same applies to areas conquered by the IS in Syria where most probably the IS also captured Syrian chemical ammunition that was not evacuated from areas where the weapons were hidden. Even though the IS obtained several warplanes, they were obsolete and in no state to fly.

This reality on the ground favored the IS as long as the coalitions (U.S. and Russian) did not intervene with their airpower. Unwilling to put "boots on the ground," the U.S. and Russians chose to crush IS forces and the rebels from the air, targeting their equipment, logistics, leaders, and military formations. The choice was to pinpoint the strikes, sometimes through the use of laser-pointing artillery officers on the ground rather than using the strategy of "carpet bombing," making the process of elimination rather slow and sometimes ineffective. However, in the long run, the U.S. and Russian effort worked. Having no adversary in the skies and no weapon systems capable of downing combat planes, after two years the coalitions succeeded to reduce IS military power and to force it into retreat.

The IS had no answer to the air campaign since the aircraft flew and bombed from above the ceiling of performance of its shoulder-fired ground-to-air missiles. However, on the ground, the IS adopted impressive anti-personnel and vehicle mining tactics and excelled in urban warfare in which a small number of combatants could withstand large regular army formation. Instead of a viable air force, the IS used human bombers to penetrate the defenses of its enemies, a tactic used in Kobane, Tikrit, Palmyra and dozens of other places. These tactics did not change the balance of forces on the ground, and the IS kept fighting while in a position of inferiority, which in turn translated to the loss of territory it suffered in recent months.

Diminishing financial support: When IS captured Mosul, it looted Mosul's central bank. According to various reports, the IS absconded with $500 million. There have also been reports of the IS sale of oil via Turkey and even selling directly to the Assad regime. But air attacks on oil truck convoys have cut into IS earnings. IS obtained funds from trafficking stolen antiquities, but efforts are made to block the sales. It seems that of late their principal income comes from monies raised in private circles in the Gulf States that are insufficient to maintain the structure of the state. Taxes imposed on IS citizens, as well as fines imposed on non-Muslims, are another source of revenue, insufficient as well, but they still allow maintaining the basic infrastructure of the IS.

In the last year, however, U.S. aircraft unleashed a new and effective financial measure: blowing up the Islamic State's coffers. In January 2016, the American-led coalition claimed to have destroyed nine depots where "tens of millions of dollars" were stashed.

These controls on the flow of monies carried out by the United States are forcing the IS to find alternatives. Without that money, the IS cannot recruit new fighters nor pay monthly salaries to its fighters and administration. The question remains: how long can the IS sustain such a basic economy without pushing its citizens and fighters to despair and desert.

The Islamic State's Retreat

Two years after the proclamation of the Caliphate and after stunning victories in Iraq and Syria, the IS is retreating. Still, the IS has made some territorial progress in northwest Syria (Aleppo, Homs) and in Syria's far east (Hasakeh). However, those key cities have not fallen to the IS while the Islamic State's two main cities – Mosul and Rakka – have become the next targets of the coalition forces. It is clear that as long as coalition leaders will not engage in ground forces, Rakka and Mosul will remain IS bastions until local forces (Syrian and Iraqi) dislodge the IS from its strongholds. This is not about to happen in the coming weeks or months. It is a process that will eventually occur, slowly and painstakingly.

Therefore, the Islamic State is looking for alternatives: Libya is a place of choice because of its disintegration. However, its closeness to Europe makes a takeover by the IS improbable because it will inevitably ignite a military reaction. Europe and the United States are already discussing their reactions. Afghanistan and Yemen may be alternatives for the IS. Recently the IS has been fighting the Taliban in Afghanistan, which it opposes ideologically, and has taken control of remote areas in the eastern part of the country. In Yemen, the IS has found a fertile environment in the Governorate of Hadramaut.

A cautionary note: One should not underestimate the IS appeal in Saudi Arabia, Egypt, Morocco and Tunisia. A symbiosis has been created between the IS and local radical Muslim organizations whose aim is to spread havoc and install an Islamic Caliphate in lieu of the acting regimes. In the meantime, the Arab nation-states have the upper hand at a very high price. They must be vigilant and aggressive in their pursuit of the destabilizing forces that threaten their regimes. An eventual defeat of the IS will not translate immediately into an elimination of the radical Muslim movements. Such a development can occur only when the Arab nation-states will offer a viable ideological alternative and champion a socio-economical welfare doctrine.

Col. (ret.) Dr. Jacques Neriah, a special analyst for the Middle East at the Jerusalem Center for Public Affairs, was formerly Foreign Policy Advisor to Prime Minister Yitzhak Rabin and Deputy Head for Assessment of Israeli Military Intelligence.